The term 'industry risk' refers to the elements that can have an impact (favourable or adverse) on a specific industry, which can then affect a companies’ business’s growth, profitability, and volatility within the industry. Industries are exposed to a variety of hazards due to a changing technology landscape, governmental tariffs, a fluctuating macroeconomic environment, competitive threats, and other factors. Each of these can have a negative effect on a company's profitability, sales, cash flow, growth, and stock price. Assessing industry risk will enable a company to make more sensible projections for crucial milestones. Emerging industries typically carry greater risks than established ones with stable futures and therefore, it's crucial to evaluate these risks before investing.
Corporate Risks arising due to market and economy related factors, such as internal or external political uncertainty, global slowdown, taxation-regulatory changes etc. Market and economy related risks are also identified as ‘Systematic Risks’, further classified the risks into below mentioned categories.
Technology risks are also identified as information technology related risks which may arise due to failure of any installed hardware or software system, spam, viruses or any malicious attack. Also delay/over/under adoption of trending disruptive technologies can lead to technology related risks. Classified as below mentioned categories:
Risk of losses caused due to faulty or failed processes, systems or human resource related inefficiencies are classified as operational and physical risks. Classified Operational & Physical risks in below mentioned categories.
Risks relate to the loss of confidentiality, integrity, or availability of information, data, or information (or control) systems and reflect the potential adverse impacts to organizational operations. These attacks can cause major financial losses, reputational harm, and a loss of client trust. Regarding cybersecurity, the BFSI industry in India has several difficulties, including difficult-to-secure legacy systems, a shortage of qualified cybersecurity personnel, and the requirement for ongoing system and network monitoring. There is a significant investment in cybersecurity tools like network monitoring, endpoint security, access control, and threat intelligence and are in below mentioned categories.
A natural hazard is the threat of an event that will likely have a negative impact. A natural disaster is the negative impact following an actual occurrence of natural hazard if it significantly harms a community. Due to India’s geographical structure, it is one of the most disaster-prone countries in the world. Natural hazards like floods, earthquakes, landslides, and cyclones are common risks faced by India. The situation has worsened due to rise in GHG emissions, loss of biodiversity, deforestation, and degradation of environment that led to risks in below mentioned categories..
Strategic risk is the risk that failed business decisions may pose to a company. Strategic risk is often a major factor in determining a company's worth, particularly observable if the company experiences a sharp decline in a short period of time. Several factors, such as unethical or unlawful activities, poor customer service, product recalls, data breaches, or unfavorable media coverage, can lead to strategic risk. An organization's reputation can be severely harmed by a single negative incident, such as a high- profile data breach or fraud scandal, resulting in a loss of clients, income, and market share.
Risk can be defined as the combination of the probability of an event and its consequences.
Individual businesses shall identify risks, and analyze the potential risk outcomes. Accepting the risk and resolution with insurable solutions, leads to reduction in risk. An emerging risk - “A risk resulting from a newly identified hazard to which a significant exposure may occur, or from an unexpected new or increased significant exposure and/or susceptibility to a known hazard.”
Identify risks specific to the business
Industry Exposure
Individual Exposure
Emerging Risk
Assess the likelihood and impact of each risk
Risk probability
Risk Transfer
Risk Avoidance
Risk Assessment
Risk Reporting
Major losses case summary
Strategies to mitigate the identified risk
Best Practices
Peer buying pattern
Industry benchmarking
Insurable/ non Insurable risks
Insurance coverage tailored to specific risks
Risk Acceptance
Observe & customize
Loss Reduction
For management of risks
Implement proactive risk control
Emergency response plans for unforeseen event
Review the effectiveness of the solution
Industries operate in a highly regulated environment in which compliance risks are very high. Insurance companies acts as a risk management partners for customers, can add value to the opted policy.
Pharmaceutical & ChemicalsProduct deficiency, Poor product performance, Regulatory non-compliances, Trademark Violations, Patent breach, Data & Security breach, Property Damage, Substandard Raw materials, Product safety
FMCGProperty Damage, Substandard raw materials, Supply chain interruption, Product recall, Regulatory risk, Human resource management, Shift in consumer behavior
Energy, Infrastructure, Business Interruption, Crisis prepardness, Reputational damage, Environmental liability, Supply chain interruption, Workplace accident, Cost overruns/delays, Financial liabilities, Statutory norms, Political & regulatory risk
Banking & Financial ServicesMergers & acquisitions, Business Interruption, Cyber, Security Breach, Crisis management, Credit risk, Marketing risk, Operational risk, Liquidity risk, Interest rate risk
AutomobilesSupply Chain interruption, Financial risk, Competition, Operational risk, Logistics risk, Reputational risk, Product recall, Product patent, Product safety
ITESData & Security Breach, Regulatory & Statutory obligations, Disruptive technology, Data compromise, Counterfeit, Identity theft, Financial risk
Insurable solutions: In order to transform every aspect of the Industry in process, there are solutions that can mitigate the risk and the burden on the insured and insurer.
What are few Risk Control Measures?
The company may implement proactive risk control measures to minimize the likelihood and impact of risks. This may involve implementing robust cybersecurity protocols, regular equipment maintenance, employee training programs, and adherence to regulatory standards.
To know more about the risk mitigation solutions please visit the Risk Management section
